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October 25, 2014

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The Policy Racket

Joe Heck stands alone among GOP to oppose defunding housing program

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Sam Morris / Las Vegas Sun

Joe Heck speaks at the Republican’s election night party early Wednesday, November 3, 2010 at the Venetian.

Sun Coverage

Republican Joe Heck enjoys a unique position in Congress as the representative of the district more plagued by foreclosures than any other in the country.

Today, with that in mind, he adopted a unique position in his party as the only House Republican to vote against a bill to defund a Federal Housing Administration program to assist homeowners with underwater loans.

“I agree that people need a paycheck, not a government check,” he said on the House floor prior to the vote. “But we must help individuals who are trying to do the right thing.”

The FHA program allows existing homeowners with underwater mortgages to convert those mortgages to FHA-backed ones, which are usually offered at a lower interest rate than is available through private lenders, especially in this post-subprime era.

But the program hasn’t been well-utilized. It was created under the authority of the Troubled Asset Relief Program -- also known as the bank bailout bill -- which put $8 billion toward the FHA refinancing deal. The Obama administration estimated it would eventually serve anywhere from 500,000 to 1.5 million homeowners.

To date, though, only about 245 homeowner applications have been submitted, and only about 44 of those have been refinanced -- meaning only about $50 million of that $8 billion pot has been tapped.

“This program is not working for our state,” said Nevada Republican Rep. Dean Heller, who voted to terminate the program. “Many federal programs were created with good intentions, however, we must have the courage to eliminate the programs that do not work.”

But a bad roll-out isn’t a reason to sound the death knell on a program, Heck said, especially in a state that he calls "ground zero for America’s housing crisis," with 390,192 underwater mortgages statewide.

“A failed P.R. job should not be the reason a good program dies,” Heck said. “The FHA refinancing program can be a good program, but it needs more attention, and perhaps reform, so homeowners know it’s an option.”

Nevada’s Democratic representative Shelley Berkley also voted to preserve funding for the FHA refinancing program. But the House succeeded in passing the measure to strip funding from the program by a vote of 256-171, with 18 Democrats -- including many fiscal conservative Blue Dogs -- voting with the Republican majority.

"There’s no question this program needs more work and that it has been slow to get off the ground, but its potential to help homeowners in Las Vegas and other communities through an FHA Short Refinance Option is too great to just terminate this effort overnight," Berkley said. "My hope is that we’ll continue to see an increase in the number of loans that are modified under this program and in the number of lending institutions that participate."

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  1. If the program had been well conceived it would have served more people. It is probably good to kill it, almost everything done by DHUD is no good.

  2. I just don't understand. Banks will not renegotiate a lower loan principal that the existing homeowers would qualify for, however they will sell the same home in a short sale at an even lower price.

    Obama's plan is a failure since he never proposed real regulations (Cram-Down Rule), he's much more interested in his Wall-Street donors. Boehner and Obama are sleeping in the same Wall-Street bed.

  3. It wasn't the FHA that made bad loans. It was the PRIVATE banks and brokers, of which Countrywide (now part of Bank of America) was the prime example. Countrywide created over $4Trillion of toxic loans all by itself. This whole financial meltdown was caused by folks in the PRIVATE sector. And we (1) bailed them out at taxpayer expense, and (2) have so far failed to change the perverse incentives which led them to put our whole economy in jeopardy.

  4. Would someone please tell Mr. Heck that our country is broke! (he refuses contact from anyone outside his district). The housing bubble was created by initiatives enacted during the Clinton administration which forced banks to make risky loans to people who would not otherwise qualify. As always, the federal government created the problem and they are exacerbating the problem now with all kinds of band-aid "fixes".

  5. Nick: I agree with you to a point. I bought my home in July 2007 and it's lost about 66% of its value since then. Now ordinarily I'd just eat my porridge and swallow that as a bad decision on my part. But come to find out that the government is actually working to drive down property values in my neighborhood. They're doing it by taking my tax dollars through the "neighborhood stabilization program" and buying foreclosures. And come to find out they bought the home right across the street from me for $60,000, which is about 25% of the purchase price of my home. So, when I ask for the loan modification and principle reduction I think I have some valid arguments that government, in a multitude of ways, is materially responsible for the decline in value of my home.

    I've never taken a dime of unemployment, welfare, food stamps or any other government handout. I paid for my education myself through a bachelor's degree as well as specialized education. At some point when the government is attacking your ability to live and maintain your standard of living on a host of fronts you have to say "enough is enough." So yeah, I'm going to seek a home modification because I'm sick of getting ground into the dirt trying to play by an elastic set of rules that seem to favor anyone and everyone but me.